Which of the Following Statements Is Correct

question 14

Multiple Choice

Which of the following statements is correct?

• A) One advantage of the residual dividend policy is that it leads to a stable dividend payout, which investors like.
• B) An increase in the stock price when a company decreases its dividend is consistent with signaling theory as postulated by MM.
• C) If the "clientele effect" is correct, then for a company whose earnings fluctuate, a policy of paying a constant percentage of net income will probably maximize the stock price.
• D) Stock repurchases make the most sense at times when a company believes its stock is undervalued.
• E) Firms with a lot of good investment opportunities and a relatively small amount of cash tend to have above average payout ratios.

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Definitions:

Payment Delays

Occurrences when payments to creditors or vendors take longer than agreed upon, often due to administrative issues or financial problems.

Explanation of Benefits (EOB)

A document provided by insurance companies detailing what treatments/services were covered and what payment responsibilities the insured has.

Charge

The price or cost that someone has to pay for goods, a service, or admission to an event.

Third-Party Reimbursement

A phrase coined to indicate payment of services rendered by someone other than the patient. Today, the most common third-party payers are federal and state agencies, insurance companies, and workers’ compensation.